Pact could spell life for college internet radio

From staff and wire reports

July 8th, 2009

A landmark agreement reached July 7 will halt a potentially harmful increase in copyright royalty rates for internet radio broadcasters, but college radio stations will continue to negotiate rates that could be the key to their survival.

President Obama signed an extension to the Webcaster Settlement Act on June 30, after Congress passed the measure that would give college internet radio stations–along with other web-based stations, such as religious radio–30 days to make a deal with SoundExchange, a nonprofit organization that collects royalties from internet radio stations.

“I’m expecting that we’ll be engaged in discussion to see if we can’t work out an agreement,” said John Simson, executive director of Washington, D.C.-based SoundExchange.

Simson said negotiations with college radio stations come with a unique challenge: Most stations don’t have a full-time staff, so it’s more difficult to track the songs the station plays and how copyright royalty fees should be paid out.

Electronic tracking of which songs college stations play was introduced earlier this decade, Simson said, but many colleges balked at the offer.

“In the early days, [colleges] thought we were trying to be punitive about it,” he said. “But you want to be able to be as accurate as you can.”

Although royalty rates for college internet radio stations are still in flux, the future of commercial internet radio appears more secure after a handful of online stations reached an agreement to head off a potentially crippling increase in copyright royalty rates.

The deal is the product of two years of negotiations between webcasters and copyright holders. In March 2007, a ruling by the federal Copyright Royalty Board dramatically raised the rates that internet radio stations must pay artists and recording labels–leading many online radio stations to warn that the new rates would put them out of business by eating up as much as 70 percent of revenue.

At least one popular online radio service–Pandora Media of Oakland, Calif., which derives much of its revenue from advertising–said the new agreement will help ensure its survival.

"For us, it’s hard to overstate how significant this is," said Pandora founder Tim Westergren. "It was either this or an ugly alternative."

The revenue-sharing deal announced July 7 is between SoundExchange and three smaller webcasters: radioIO, Digitally Imported, and AccuRadio.

Westergren said Pandora plans to sign on to the new royalty terms, too. And Jonathan Potter, executive director of the Digital Media Association, which represents webcasters and other online media companies, predicted some of the association’s other members also will join the deal.

Under the agreement, large commercial webcasters will pay copyright owners up to 25 percent of their revenue, or a "per-performance" rate that is below the rates set by the Copyright Royalty Board. Smaller webcasters will pay either a percent of revenue or a percent of expenses.

In a statement, SoundExchange’s Simson said the deal will give commercial webcasters a chance to "flesh out various business models" and give artists and other copyright holders the opportunity to "share in the success their recordings generate."

Lawmakers also praised the agreement. Congress has already passed legislation making any deal reached between webcasters and SoundExchange legally binding. Because internet radio companies operate under a government license, these deals need congressional authorization.

Already this year, SoundExchange struck new online royalty agreements with the National Association of Broadcasters and the Corporation for Public Broadcasting.

Traditional AM and FM broadcasters are exempt from copyright royalty rates for over-the-air radio play, because that airplay is thought to provide free promotion for artists and labels. But the broadcasters are subject to the new rates for any songs streamed over radio station web sites.